Is Pre-Paying Your Mortgage a Smart Move?
As a homeowner, it’s important to weight your mortgage options and understand the opportunities that exist for you with the term, principal, and interest of your loan. One of the choices that may be available for you is to pre-pay your mortgage. If you have the means to take advantage of this possibility, and if your existing mortgage allows for pre-payment, there are three main questions to ask.
First off, how can you pre-pay your mortgage?
Depending on the kind of mortgage loan you have, there may be number of options to choose from when it comes to pre-paying your mortgage. For example, you could make additional monthly payments, you could put a lump sum towards your mortgage principle, or you could increase the set amount of money that you pay towards your mortgage each month. When you’re able to lower your outstanding mortgage balance, it results in the decrease of both the principle amount that you still owe and the amount that interest can be applied to, which offers significant savings in the long run.
Secondly, what are the benefits to pre-paying your mortgage?
The perks add up quickly when you’re able to pre-pay or accelerate your loan. One of the incentives can be the possibility for better financing options, because when you’re repaying your mortgage quickly, it will likely equate to improved loan terms and a more advantageous interest rate when it comes time to refinance down the road. Pre-paying your mortgage can also help you build equity faster; since you’ll have more of the loan paid off, it means your Shuswap home becomes a greater asset for you. Plus, the more obvious benefit of no longer having monthly mortgage payments is that it considerably free ups your cash flow.
Lastly, what should you do to make sure you’re protected?
Confirm that you’ve thoroughly checked the details of your existing mortgage loan to ensure there aren’t any penalties for pre-payment. When in doubt, speak with a trusted mortgage broker to learn about the fine print in your loan contract which may not be as obviously stated – and determine how to best protect yourself from any impending fees or charges, so you’re not caught off guard.
If you’re interested in learning more about your mortgage options, let’s chat! Get in touch today and we can determine which payment strategy benefits you and your family the most for your future plans.